SoftBank’s $4.4bn Compass needle pointed at London homes market

Last week, WeWork backer SoftBank pumped $400m into Compass, a high-end US residential property site absurdly valued at $4.4bn. Let’s assume some of that cash will be splashed in London. Shame not

Who with? Who knows? Five-year-young Compass has cleared $34bn in home sales so far this year and is on track to make $1bn in revenue, says geek Website TechCrunch. No profit, of course. Like WeWork, gold is supposed to magically appear after opposition is vanquished.

 Compass claims to be the biggest independent brokerage in California. Co-founder Ori Allon says: “Our vision is for Compass to be everywhere, and we are excited to expand internationally in 2019. A money-blowing residential version of WeWork? Maybe. But take a turn round the website Web site  – be afraid, it makes Purplebricks look like Gumtree and Rightmove like Argos. Compass may end up in a death spiral, but software this sophisticated can’t be uninvented.

“We are continuing to build an end-to-end technology platform that services agents and their clients through every step of the real estate journey,” Allon says. Meaning a ‘kiss, marry, (try to) kill’ item is on the agenda for the stray cat members of CLEA, the Central London Estate Agents organisation.

Follow the money

There isn’t that much cream in the London high-end resi bowl. Most is quietly and efficiently licked up by Knight Frank and Savills. Few High Net Worth clients of either will want to expose themselves on an upmarket version of Purplebricks.

What should attract SoftBank’s boss, Japanese zillionaire Masayoshi Son, is where the real money lies in the UK residential sector: the listing sites. Rightmove has made £553m profit on £962m turnover since 2013 – margins that put the site in ever-present danger from disruptive rival

This summer, Primelocation owner Zoopla was sold for £2.2bn by the Daily Mail Group to US private equity group Silver Lake, based in California. There is presumably a five-year plan to cash out. Then there is OnTheMarket, a tempting loss-making sprat, with a good-but-not-great website set up by agents and part-floated in January, raising £30m to spend on marketing, which has doubled web viewings.

A SoftBank infusion of a few hundred million in loose change injected through the Compass needle would scare Rightmove into lowering its charges, if nothing else.

This article first appeared in Peter’s column in Property Week on October 4 2018

Last week SoftBank pumped $400m into Compass to fund international expansion


Author: Peter Bill

Author and commentator on UK housing and commercial real estate. Co-author of Broken Homes: Britain's Housing Crisis: Faults, Factiods and Fixes (2020) & Planet Property (2015) detailing the workings of the real estate sector. Former editor of Building magazine and Estates Gazette and columnist on the London Evening Standard. Columnist for Property Week.

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